Abridged Advice is a short form of affordable advice that enables our Pension Transfer Specialist (PTS) adviser to:
A PTS must not consider the client’s proposed receiving scheme as part of Abridged Advice.
Where the outcome from Abridged Advice is unclear, the client is under no obligation to proceed to Full Advice and, indeed, the Financial Conduct Authority (FCA) expect that subsequent Full Advice will result in a recommendation not to transfer for some clients, once the PTS has been able to analyse the full impact of transferring to a specific alternative product, such as a workplace pension scheme, flexi-access plan or annuity
Full Advice will build on the information gathered during Abridged Advice but go on to provide an in-depth analysis of the safeguarded pension benefits, as compared to an alternative pension product.
To address initial conflicts of interest, the Financial Conduct Authority (FCA) requires that advisers must charge the same monetary amount for advice to transfer as for advice not to transfer. Contingent charging, i.e. the charge only applying if a transfer goes ahead, was banned with effect from 1st October 2020.
This means that where a client wishes to take Full Advice, the fee is agreed in advance of any work being carried out on a Full Advice basis and must be paid by the client regardless of the outcome of that advice.
In the event of a recommendation to transfer, it may be possible for the fee to be paid from the transferred funds.
There are exceptions from the ban, known as ‘carve-outs’, for specific groups of consumers with certain identifiable circumstances.
The FCA has designed the ‘carve-outs’ to let most clients who might benefit from a transfer, and who would otherwise find it difficult to afford advice, continue to pay for advice on a contingent basis.
These clients fall into 2 groups: -
Both the serious financial difficulty ‘carve-out’ and the serious ill-health ‘carve-out’ require that a client is unable to pay for full pension transfer advice.
The type of situation in which the ‘carve out’ test will be met will be based on the Money and Pensions Service (MaPS) definition of over-indebtedness, which has 2 parts:
If a client would immediately meet this test if they had to pay for advice on a non-contingent basis, then the FCA considers they can be treated as meeting the test.
To be eligible, the client must also be within 6 months of Minimum Pension Age, as otherwise a transfer would be unable to meet their need if it proceeded, as they would not be able to access the funds on transfer. An exception would be where you are also in serious ill-health and qualify for both ‘carve-outs’.
Potential clients with life-limiting medical conditions can self-evidence their conditions. We are required to record the evidence the client provides. For example, evidence may take the form of existing documentation from a registered medical practitioner, including details of treatment. The FCA does not expect anyone to incur extra costs or significant time in getting evidence. GP health records are increasingly available online and hospital records can be requested from the relevant trust.
An upper age limit of age 75 applies for this ‘carve-out’ as, in the event of a suitable transfer, there are tax advantages for beneficiaries inheriting money purchase pension funds where the scheme member’s death occurs before age 75.
This ‘carve-out’ will be restricted to those who do not have the means to pay for advice, including those who would be likely to be forced into debt if they did not meet the tests for the carve-out and had to pay for advice on a non-contingent basis.
The client’s own IFA who introduces the client to Pension Income Planning Ltd, supplies us with details of the preferred destination of funds, i.e. preferred provider and investment choice, in the event of a recommendation to transfer
Where a transfer is deemed suitable, we will utilise the chosen destination of funds if this requirement can be met and if the chosen funds fit within the risk profile and objectives of the client.
The introducer is asked to provide fund/portfolio fact sheets and analytical research to assist with our due diligence process, and to help us in approving the selection.
However, the introducer should be aware that Pension Income Planning Ltd are required by the FCA to consider a workplace pension more suitable than any preferred alternative product, unless it can be proven otherwise. The workplace pension must be considered as the default solution in the event of a recommendation to transfer.
PFS Good Practice Guide: When advising on a pension transfer, the advice must take account of the proposed destination of the transfer funds if a transfer proceeded.
This includes both the proposed scheme and the proposed investments in that scheme.
The FCA rules do not prevent two separate advisers providing the pension transfer advice and the advice on the proposed receiving scheme and its investments. However, the FCA expect the two advisers to work with the same information about the client and have in place robust processes to ensure that this happens.
The investment advice is included in the contingent charging ban and levelling of fees.
The Financial Conduct Authority Policy Statement 20/6 published in June 2020, stated that when considering the receiving scheme for a full pension transfer, the client’s current or most recent WPS must be initially considered as suitable, unless an alternative non-WPS can be shown to be more suitable.
The only valid reasons stipulated by the FCA for dismissing a WPS as not suitable are:
Our website provides a complete 'client journey' from initial contact, through triage to submission of all the paperwork needed to access Abridged Advice. Everything can be completed online. Documents are then automatically sent onto the team at Pension Income Planning Ltd.
Should you have any queries about the process or wish to discuss a specific scenario, you can contact the office on 01277 600518 or by email to email@example.com
A Cash Equivalent Transfer Value (CETV) is required to enable us to provide Abridged Advice to a client who has deferred benefits in a Defined Benefit (DB) scheme. Scheme administrators are required to provide a CETV within 3 months of the request being made. *
The CETV is guaranteed for 3 months from the date of calculation. During this time we must obtain all relevant information from the scheme and the client, analyse that information, meet with the client to provide Abridged Advice, which is confirmed in a written report and, if deemed appropriate, move to Full Advice, which will include full analysis of the DB scheme benefits and the receiving plan or scheme, a further client meeting and a detailed recommendation report.
If a transfer recommendation can be made and is accepted, we must get the necessary paperwork, and any other essential requirements, to the ceding scheme before the end of the 3-month period.
Given the strict timescales, it is preferable that the CETV is not obtained prior to referral to Pension Income Planning Ltd as this will shorten the time available to us to complete the process and the CETV may expire.
We will regularly chase outstanding information and keep both client and introducer informed of progress.
Other types of safeguarded pension benefits, such as Section 32 Buy Out plans with Guaranteed Minimum Pension and deferred annuities, do not generally have guaranteed transfer values and the timescales can be shorter.
*extended to 6 months during the Covid-19 pandemic.
Pension Income Planning Ltd does not deal with any form of opt out advice from a DB scheme, even where the link is solely an old salary link (see next question). For such clients, we send a standard letter stating we cannot act.
Where a client submitted to us has recently opted out of their scheme, we will issue a letter to that client and copy in their introducer.
This will confirm that Pension Income Planning Ltd were not involved in the advice process to opt out of the DB scheme and that the client should confirm their understanding and acceptance that it was their own decision and not made solely to allow a possible transfer.
We will deal with the case as normal from then on as we cannot opt the client back into the scheme.
For some clients, opting out may be a good idea, especially if it is only a salary link; however, we do not give advice on this area.
If a client is an employee who is no longer a member of their employer’s DB scheme but is still working for the same employer, e.g. the scheme closed, in most cases they are classed as a 'Deferred Member' of the scheme. However, with some schemes, such an employee may retain a link to their scheme benefits and will be deemed to be an 'Active Deferred Member'.
Any links are deemed valuable, so breaking the link is never advised. Clients who find themselves still working for an employer where they have built up DB benefits and who are considering transferring, should contact their HR department or their scheme trustees to check if any links exist.
If we discover an undisclosed link, we will be unable to advise, and we will write to the client to explain the implications of being an Active Deferred Member. In these circumstances, £600 of the Abridged Advice fee already paid, will be refunded, with Pension Income Planning retaining the balance to cover administration costs, as we will have loaded the client’s details to our systems and written to scheme trustees to gather the required information.
In the case of an additional scheme charged at £300 + VAT we will refund £200.
Pension Income Planning Ltd will also write to the client to explain the implications of being an Active Deferred Member.
The Financial Conduct Authority have stipulated that every person who wishes to consider the transfer of a safeguarded pension arrangement, such a DB scheme, must receive advice from a Pension Transfer Specialist (PTS) in the form of a personal recommendation.
For Full Advice, the PTS must conduct an appropriate pension transfer analysis (APTA) including a transfer value comparator (TVC). The aim of the APTA is to help to demonstrate if a personal recommendation to transfer or not, may be in the person’s best interests. The APTA should take into account personal circumstances (e.g. attitude to risk, tax implications, access to state benefits and life expectancy), any compromises the person is prepared to make for the potential benefits of a transfer, the alternative options available and the financial strength of the existing scheme.
The TVC element of the APTA is intended to compare, in a simple format, the cash equivalent transfer value offered by the existing scheme with the cost of purchasing the same benefits via an annuity, using various assumptions prescribed by the FCA.
This will be presented to the client and discussed at the Full Advice meeting.
A Pension Increase Exchange (PIE) is an offer that some DB scheme trustees make to their members to give up future non-statutory pension increases in respect of benefits accrued pre-April 1997, in return for a higher initial pension.
Accepting this offer would mean that the purchasing power of the pension income may be eroded by the effects of inflation.
On the other hand, it would allow for more income to be available in the early years of retirement when outgoings may be higher.
We can provide introducers with an email copy of the Abridged Advice report and the Full Advice recommendation report, as sent to the client. We can also provide a recording of the client meetings.
Introducers will be kept informed of the progress of the case at each stage and the outcome, once we have made our recommendation.
No. In accordance with the terms of our Pension Transfer Service Introducer Agreement, upon completion of the advice process and the investment of monies, we actively promote to the client that any new plan should be transferred to the introducing adviser’s servicing agency. The introducing adviser will be responsible for submitting the client’s letter of authority to the plan provider in a timely fashion.
Pension Income Planning Ltd are a Pension Transfer Specialist (PTS) firm and do not operate in any other area of advice.
Our Pension Transfer Service Introducer Agreement states that the PTS shall “not solicit or seek to entice away from the introducer any person that is introduced to them…”
Our client agreement also confirms the limitation of our services.
Generally, lump sum death benefits from pension arrangements are exempt from IHT, but this may not be the case where a person transfers funds from one arrangement to another, such as a Defined Benefit (DB) pension scheme to a Flexi-access pension plan, whilst in ill-health and then dies within 2 years of the transfer.
This would need to be reported to HMRC, who will decide whether the “transfer of value” caused a loss the person’s estate, thus avoiding IHT that would otherwise have been due.
HMRC have not published any guidance on how to calculate the “transfer of value”. The individual’s legal representatives would need to negotiate with HMRC regarding this, based upon individual circumstances. However, the following is an example scenario which HMRC have said would be an acceptable calculation method.
Mary, 60, was diagnosed with a terminal illness with a life expectancy of only 12 months and she transferred her defined benefit (DB) pension to a flexi-access plan. Her DB transfer value was £500,000 and she died within 24 months of completing the transfer.
The value of Mary’s benefits before the transfer is then compared against the value of her benefits after the transfer, assuming that Mary had fully withdrawn her flexi-access fund when the transfer completed.
The value before the transfer is based on the transfer value of £500,000 plus allowance for growth during Mary’s expected lifetime, say 5%, which can then be discounted, over the same period, to the present-day by, say, 10%. This gives a value of £472,500. (Note. The growth and discount rates are just examples and would need to be agreed by HMRC).
The value after the transfer is £500,000 less any income tax deducted if this amount was fully withdrawn. Assuming this was Mary’s only pension fund and she had no other income, the net value could be £346,250 (£125,000 tax-free cash and the balance subject to English income tax rates in 2021/22).
HMRC would consider the loss to the estate as a result of the transfer to be £126,250 (£472,500 - £346,250) and IHT may be due on that amount.
There is no “spousal exemption”, e.g. even if Mary had nominated her spouse as the sole beneficiary of the death benefits, IHT may still be payable.
It is important to bear this in mind if you are considering a transfer and are in serious ill-health.
All figures are for illustrative purposes only. The growth and discount rates used would need to be agreed with HMRC.
The vast majority of our clients will, by default, be classified as RETAIL CLIENTS.
Retail Clients are afforded the most protection, will receive more information and have access to the Financial Ombudsman Service and the Financial Services Compensation Scheme.
It is possible for an individual to be classified as an Elective Profession Client provided that
A. Pension Income Planning undertakes an assessment “of the expertise, experience and knowledge of the client that gives reasonable assurance, in light of the nature of the transactions or services envisaged, that the client is capable of making his own investment decisions and understanding the risks involved.”
B. The client can meet at least 2 of the following 3 strict criteria: -
1.the client has carried out transactions, in significant size, on the relevant market at an average frequency of 10 per quarter over the previous four quarters;
client works or has
worked in the financial sector for at least one year in a professional
position, which requires knowledge of the transactions or services envisaged;
(the "quantitative test")
Elective Professional Clients will receive a lower level of protection than Retail Clients. Professionals may not necessarily have the same rights under the Financial Ombudsman Service and the Financial Services Compensation Scheme.
If you believe that your client would satisfy these tests and does wish to be classified as an Elective Professional , then a three-step process must be followed.
1. The client must state in writing to the firm that it wishes to be treated as a professional client either generally or in respect of a particular service or transaction or type of transaction or product;
3. The clientmust state in writing, in a separate document from the contract, that it is aware of the consequences of losing such protections.
Where Pension Income Planning Ltd is not satisfied that the client meets the criteria to be classified as an Elective Professional, then he will be classified by default as a RETAIL CLIENT.
Prior to engaging Pension Income Planning Ltd, a client must firstly complete our initial triage stages which includes viewing the Money Alive educational video journey.A fee of £50 inclusive of VAT applies, which is payable via the homepage of this website.
Where the client makes the decision to engage Pension Income Planning Ltd to provide advice on safeguarded benefits, including Defined Benefit pensions and Section 32 Buy Out Plans with Guaranteed Minimum Pension and Deferred Annuities, our fee for access to Abridged Advice is £960 inclusive of VAT.This covers the cost of a basic analysis of the benefits of one transfer value for the client, as well as a detailed review of the client’s individual circumstances, needs and objectives. Where there are 2 or more periods of service these are chargeable as separate transfer values.
Our fee for any additional schemes is £300 + VAT per scheme.Where there are multiple schemes, we will apply the £960 fee to the larger of your schemes. *
Abridged Advice fees are payable before we commence work on the case.
Where the decision is made to progress to Full Advice, further fees are payable based on a fee of £4,000 + 1% of the Cash Equivalent Transfer Value, per scheme.
Money Purchase Fund such as Additional Voluntary Contributions (AVCs) connected to the DB scheme
Advice relating to the transfer of Additional Voluntary Contributions (AVCs) is charged at 1% of their value as quoted in the transfer pack. Please note that the actual value on the date of transfer is very likely to differ.
Where the money purchase funds do not need to move at the same time as the DB scheme, your own introducing IFA should provide separate advice on these benefits.
*Where the client goes on to Full Advice, the applicable Net Abridged Advice fee will be offset against the Full Advice fee.
For non-standard Self-Invested Personal Pension investments and Small Self-Administered Scheme propositions, our terms for full advice include an additional 20% of the Full Advice fee, after deduction of the net Abridged Advice fee already paid.The additional 20% fee is to cover the additional liabilities that apply with these types of advice.
Our fee for Full Advice is not contingent on a recommendation to transfer and is payable regardless of whether the advice is to transfer or not transfer.
The Pension Protection Fund (PPF) was set up in April 2005 to ensure that all members of eligible pension schemes receive compensation for pension payments which may otherwise have been lost because the sponsoring employer went out of business. If a scheme is wound up when the company is still solvent, the company is required to pay enough into the scheme to enable the benefits to be completely secured with an insurance company. If the company were to become insolvent and is unable to make the payment, the Pension Protection Fund might be able to take over the scheme and pay a reduced level of benefit to members.
If you change your mind and let us know before we have commenced any work on your behalf, we will refund a portion of your Abridged Advice fees as follows:
In these circumstances, for the first scheme only, £600 of the initial net fee already paid, will be refunded, with Pension Income Planning retaining the balance to cover administration costs. Additional schemes charged at £300 + VAT will receive a £200 refund.
Please note, the £50 fee paid for accessing the Money Alive educational journey is non-refundable.
There are two protections you can apply for:
1. Individual Protection - Protects your lifetime allowance to the lower of:
You can continue to build up your pensions but you must pay tax on money taken from your pension savings that exceed your protected lifetime allowance.
2. Fixed protection - Fixes your lifetime allowance at £1.25 million
You can only continue to build up your pension in limited circumstances. If you do, you'll lose your fixed protection and pay tax on the value that exceeds the lifetime allowance when you take your benefits.
UK citizens currently residing abroad, who are deferred members of a UK DB scheme and seek advice regarding the potential transfer will be charged our Full Advice fees, but this will be based on a minimum transfer value of £500,000 i.e. a Full Advice fee of £9,000. This service is offered based on: -
The applicable Net Abridged Advice fee will be offset against the Full Advice fee.